Ahead of a crucial House and NCAA hearing, leaders are scrambling to create a new system to manage revenue sharing

This Saturday, college football stadiums across the country will kick off games to mark the sport’s second full weekend.

Arkansas plays Oklahoma State in an SEC vs. Big 12 matchup, Iowa State battles Iowa in the CyHawk rivalry game and Tennessee meets NC State in a neutral-zone showdown in Charlotte. In Ann Arbor, the biggest game begins: No. 3 Texas vs. No. 10 Michigan.

While the eyes of the sport are focused on these high-profile matches on the field, perhaps even more important battles are playing out off the field. Most of them revolve around the NCAA’s historic settlement of the House of Representatives antitrust case, which should usher in a new model for athlete revenue sharing for the industry next July.

Far from the touchdowns and field goals, there are legal games being played. Strategic moves. And crucial decisions that could impact the future of college athletics.

A lot is happening.

Quietly, conference and NCAA leaders are working to establish a regulatory system to manage and enforce this new rev-share model. In order to hire outside entities to oversee the management and enforcement systems — not the NCAA — power conference officials have seen presentations from some of the world’s largest professional services firms, such as PricewaterhouseCoopers.

Meanwhile, the settlement itself still needs to be approved, something that could happen on a preliminary level this Thursday during a virtual hearing before California U.S. District Judge Claudia Wilken. She’ll hear arguments from those who believe it should be approved (lawyers for the House plaintiffs and those for the NCAA/power leagues) and the main party objecting to the settlement: attorneys for a separate antitrust case, Fontenot v. NCAA, who argue that their case should proceed because their claims aren’t being disclosed in the settlement.

On the eve of the hearing, the plaintiffs’ two top attorneys in the House of Representatives, Steve Berman and Jeffrey Kessler, indicated in two separate interviews conducted recently that they are confident the judge will approve the settlement, even if that means making changes to the language of the agreement — something many expect.

“We are very confident that she will overrule (Fontenot’s) objections,” Berman said, before adding: “There could be minor changes.”

At the local level, school leaders are preparing for the settlement’s approval and the advent of the revenue-sharing concept. They are maximizing previously untapped revenue streams (think naming rights and sponsorships); beginning to restructure their departments to resemble a more professional model (chief executive officer and other professional staff positions); and revising their budgets to rank sports (investing more in sports that attract viewers, generate revenue, and/or have the potential to compete for championships).

Meanwhile, serious work has been done nationally to identify the regulatory systems that will govern college sports’ new revenue-sharing model. Leaders are selecting outside firms to oversee a cap management reporting system; to regulate a clearinghouse for third-party endorsement/NIL deals; and to enforce existing NCAA rules, such as those against pay-for-play, etc.

Interviews with Berman, Kessler and university administrators provide a clearer picture of the new regulatory structure for college sports.

Capital management

As part of the settlement agreement, each school is allowed to share the same amount of pool money with athletes each year. The pool cap — 22% of the average Power Conference school’s revenue — applies to all schools and fluctuates based on built-in escalators and increases in school revenue.

The cap for Year 1 (2024-25) won’t be set until March, Kessler said. That’s when schools report their revenue figures from the previous school year (2023-24) to the NCAA and plaintiffs’ attorneys. Those figures are used to average out several revenue categories that are included in the revenue-sharing formula, notably ticket sales, conference distribution (primarily TV contracts) and bowl fees.

The budget for the first year is estimated at $20-23 million.

Attorneys for the plaintiffs say they plan to hire an accounting firm to audit schools to ensure they are reporting accurate revenue figures and that their payrolls are within the cap. “We don’t want schools to use other sources of revenue and disguise it as a category that falls outside the cap,” Berman said.

College administrators expect to use a reporting system to submit their athlete contract figures to a kind of database that tracks cap numbers. Details and policies surrounding contracts between schools and athletes remain unclear, but several administrators are working on drafting multi-year agreements with buyout language to limit transfer movements.

Clearing House

One of the unanswered questions in the settlement is how the NCAA and other major conferences will oversee compensation for athletes who play outside their schools.

By allowing schools to share revenue directly with their athletes, the new model incentivizes schools to shut down or at least limit their booster-led NIL collectives. The settlement upholds existing NCAA rules prohibiting pay-for-play, specifically stating that boosters may not compensate athletes through endorsement/NIL deals unless they can prove the deals are authentic and meet fair market value.

The settlement requires athletes to report their outside compensation to their schools, Kessler said, but the agreement does not require approval of deals through a governing body or clearinghouse. The NCAA and power conference leaders will establish a clearinghouse of their own, he said, as well as a new enforcement entity.

“The NCAA has indicated that they can change or even outsource their enforcement bureaucracy,” Kessler said. “Frankly, we don’t care whether they do that or not. That’s their business.”

The clearinghouse, which is operated by a third party and not the NCAA, is charged with determining whether NIL deals outside the NCAA are kosher, and the enforcement agency is responsible for imposing fines. Those deals that are deemed inadmissible must be modified or corrected for the player to avoid potential enforcement sanctions such as ineligibility.

Details remain unclear, and even plaintiffs’ attorneys are questioning the process. Will the clearinghouse really reject a deal for an athlete from a booster-owned company or NIL collective/agency?

“We’ll see what the NCAA tries to enforce,” Kessler said. “The NILs have not agreed to anything. If the NCAA tries to punish a student or a school, if they try to take action against a NIL, I think they’re probably going to see that NIL organization in court.”

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Arbitration

But before the matter goes to court, the settlement provides a final step in the process: a hearing before a neutral arbitrator.

If the clearinghouse rejects a deal because it’s deemed above market value or a school is in violation of the cap, any new enforcement agency would presumably investigate and sanction that athlete or school. That’s when, Kessler said, the sides — NCAA/power conferences versus the school and/or athlete — go before a neutral arbitrator to plead their case.

“The way it would work is that the NCAA would bring a case against someone — a school or an athlete — and when they do that, the school or athlete has the right to appeal whatever enforcement they’ve imposed,” Kessler said. “The arbitrators would hear the evidence that’s presented and make a decision.”

How an arbitrator rules may “depend on the evidence” each side presents during a series of hearings that resemble a trial, Kessler said.

One of the questions that lingers in arbitration: Will an athlete’s school side with him or her in this case?

“I expect that if the athlete pursues this, the school will support the athlete and help provide counseling to represent him in that challenge,” Kessler said.

What’s next?

The settlement is far from being finally approved.

Thursday is the next possible step along the way. If Wilken grants preliminary approval, plaintiffs’ attorneys will have 90 days to collect names of class members from universities and send them notices of the settlement. There is another 90-day period during which those members can individually object to the settlement, Berman said.

According to Kessler, final approval is not expected until January and could even take until March.

In the meantime, many organizations, individuals and even some college administrators have expressed skepticism and doubt that the settlement offers a strong long-term solution for college athletics. The settlement may still need to be codified by Congress to give the NCAA and conferences the authority to audit outside, third-party NIL payments, and it offers little in the way of a resolution to when or if athletes are considered employees – a concept that could be significantly affected by the results of the U.S. presidential and Senate elections in November.